The absence of any measures in the Spring Budget targeted at boosting the automotive retail industry by jumpstarting market demand for EVs has been widely condemned as a missed opportunity.
Chancellor Jeremy Hunt in his Spring Budget announcement focussed on short-term, ‘last throw of the dice’ measures suspected of being an attempt to salvage the Conservative Government’s election prospects.
Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle dealers across the UK, said the UK remains one of the major markets in Europe with little to offer in terms of price incentives for private buyers of electric vehicles.
“Conversely, due to strong demand for BEVs, the French government announced a temporary halt to its EV subsidised lease programme last month and will resume it again in the new year due to its success.
“In NFDA’s Spring Budget submission, NFDA had urged the government to introduce incentives to prevent EV sales from flatlining. Noticeably, fleet has been driving sales of new cars rather than private buyers. The Government must do more to help maintain momentum in the private BEV market and increase adoption of these cleaner vehicles across the UK.”
The only respite for the industry featured the news that fuel duty is to be frozen at its current rate for the next 12 months, together with an extension to the “temporary” 5p cut on fuel duty which was due to end this month.
Ian Plummer, commercial director at Auto Trader, played down the significance of the Budget fuel duty freeze: “Fuel duty has been frozen every year since 2011, so no self-respecting Chancellor would ever shoot himself in the foot by raising it in an election year.
“Drivers may avoid higher pump prices for now, but the freeze does send yet more mixed messages to any motorists tempted to switch to electric vehicles.
“Equalising VAT across public and private EV charging points would encourage people to make the switch, and for a fraction of the £6bn cost of freezing fuel duty, so today is a missed opportunity to support the green transition.”
Electric vehicle drivers who can charge at home pay just 5% VAT on their energy bill, but 38% of those without driveways are forced to use public chargers and pay the full VAT rate of 20% making the price difference between home and public charging significant which is acting as a barrier to EV adoption.
Auto Trader which has joined the FairCharge campaign has calculated that drivers charging off peak at-home could save £865 annually compared to internal combustion engine vehicles, but that a driver using public rapid chargers would pay £264 more over a year.
Fiat UK managing director Damien Dally said while the fuel duty measures will be welcome news to motorists, it’s estimated the cost to the Treasury will be around £5 billion to implement. Instead, it could have implemented the rise and ringfenced that money to invest into the UK’s “seemingly dwindling” electric vehicle strategy.
Dally said: “It’s hugely disappointing that the Chancellor has failed to reinstate financial incentives for electric vehicle buyers in today’s budget.
He added: “The government has set the direction of travel by enforcing the Zero Emission Vehicle (ZEV) Mandate and Net Zero target, but is doing nothing to incentivise retail customers to drive electric vehicles.”
Private sales account for fewer than one in five electric car registrations in 2024 to date, and the industry is concerned about meeting the 22% mandated by the government as part of the ZEV Mandate.
“The demand for electric vehicles is waning and we are sleepwalking into an electric vehicle crisis. The government is also potentially putting its Net Zero target at risk,” Dally said.
The lack of any government support for garages and auto technicians was also slated for leaving the industry behind in the EV revolution.
There was no mention surrounding the Apprenticeship Levy or wider apprenticeship reform in the Spring Budget.
NFDA’s Robinson said it is concerning that the Chancellor failed to take the opportunity to fix the existing, ‘unworkable’ Apprenticeship Levy.
“The motor retail sector experienced its highest vacancy rate in 2023. The sector currently is grappling with an intensifying skills shortage, which a reform of the Apprenticeship Levy could help alleviate. NFDA has consistently called for the Government to remove the claw-back cap and simplify the Apprenticeship Levy application process to enhance the utilisation of the capital locked into the levy. This will in turn assist dealers looking to recruit the next generation of apprentices.”
James Lett, technical editor at Autodata, agreed: “The IMI predicts a shortfall of over 29,767 technicians in 2035, the same year the ban on new combustion engine vehicles being sold has been extended to. Like many in the industry, we had high hopes that the Spring Budget would recognise the need for critical investment and support.
“A million EVs are already on the road, but they can only be serviced or repaired by technicians with specialist training and tools. Neither of these are cheap nor do we see any government investment to change that.
“Not only are garages are losing money by turning down business, EV drivers can’t access the services they need to safely be on the road. It’s a catch-22 situation that cannot continue.
“The truth is clear, the EV revolution cannot happen if the backbone of the automotive industry keeps being forgotten about. Grant garages and technicians the support they desperately need.”
Lisa Watson, director of sales at Close Brothers Motor Finance, conceded that extending the ‘temporary’ fuel duty cut by 12 months would come as some relief to motorists concerned about the soaring cost of driving.
“Whilst only likely to have a small positive impact, it’s a step in the right direction, particularly for the 53% of drivers who cite fuel prices as the biggest challenge in the next 12 months. We’ve seen continuous hikes at the pumps over the last few months and this has added further pressure to drivers who already feel they’re faced with increased costs from all lanes, making car ownership difficult to afford for 62% of drivers. What is essential now is that this cut reaches drivers’ fuel tanks and wallets.”
Moves to offset cost of living pressure on household budgets were welcome however. Forecasts from the Office of Budget Responsibility (OBR) show inflation falling below the 2% target in just a few months’ time, a year earlier than forecast in the Autumn statement.
This prompted the Chancellor to cut workers’ National Insurance by another 2p in the Budget, meaning it falls from 10% to 8% from next month and is worth £450 a year for the average worker.
NFDA’s Robinson said 2024 was a critical year for retailers. “With the ongoing shift in sales models and the landmark ZEV mandate coming into force, dealers will be under substantial pressure to adapt to the transformative trading landscape. As such, the Budget provided a significant opportunity for the Government to provide a strategic and clear vision to support the automotive retail sector but has been an opportunity which has largely been missed.”
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